How CFP® Certification Works

The title of Certified Financial Planner™ (CFP®) carries a lot of weight. It indicates that the bearer has put the time and work into obtaining CFP® certification. Anyone can say they can help you with your finances, but only a select group of financial advisors obtains CFP® certification. How does CFP® certification work? Let’s take a closer look.

What Is the CFP® Certification?

The Certified Financial Planner™ (CFP®) certification is a professional designation for financial advisors who specialize in comprehensive financial planning. The credential is administered by the Certified Financial Planner Board of Standards, Inc. (CFP Board), a nonprofit organization that sets standards for education, examination, experience and ethics for financial planning professionals.

The CFP® certification was created to establish a consistent professional standard within the financial planning industry. Historically, individuals offering financial advice did not always need formal training or standardized credentials. The CFP® designation was designed to help address that gap by creating a recognized benchmark for competency and ethical conduct in financial planning.

Financial professionals who hold the CFP® certification are trained to help clients evaluate and organize multiple aspects of their finances. This may include retirement planning, investment management, tax planning, insurance planning, estate planning and education savings strategies. Because financial decisions often overlap across these areas, CFP® professionals are trained to take a holistic approach when helping clients develop a financial plan.

The credential is widely recognized in the financial services industry and is often considered one of the leading designations for financial planning professionals. Advisors who earn the certification must meet CFP Board standards and commit to ongoing professional education and ethical responsibilities. As a result, the CFP® designation signals to clients that an advisor has met specific professional requirements and is trained to provide comprehensive financial planning services.

CFP® Requirements

Applicants who want to become certified financial planners must satisfy education requirements in relevant subject areas. You can satisfy the education requirement by taking financial planning-related coursework, or by submitting your transcript if you have a previous degree in a related field. Educational institutions around the country offer CFP Board-Registered Programs at various levels (undergraduate, post-graduate, etc.). There are even distance-learning options available.

Once you have satisfied the pre-requisites for your education you can start studying for your examination. The CFP® Certification Exam covers the ins and outs of financial planning. For example, you’ll need to understand tax and retirement planning, asset management, life insurance and employee benefits.

The certification process doesn’t just rest on the examination. To earn your CFP® certification you must have 6,000 hours of professional experience related to financial planning, or 4,000 hours of apprenticeship experience, plus additional requirements. But as you work your way to meeting the experience requirement you can track your experience hours as you go, using an online account that you’ll set up on the CFP Board portal. The process for tracking your progress toward certification is fairly straightforward. Then, once you hit the hours needed, your online account will show your status as “provisionally accepted.” When you pass your exam your status will change to “accepted.”

CFP® Ethics

Once you’ve met the education requirements, passed the exam and certified your hours of experience, you’ll be ready for certification. However, that certification comes with a set of ethics obligations. For example, you must agree to act as a “fiduciary” for your clients, putting their financial interests ahead of your own. In addition, if you fail to abide by the CFP® code of conduct you risk a sanction from the CFP Board.

On your CFP® Certification Application you’ll need to disclose any involvement you have in civil or criminal procedures, among other things. In addition to this ethics declaration you’ll need to acknowledge the CFP® professional code and the right of the CFP Board to sanction you for any professional misconduct. In addition to reviewing the disclosures you make on your application, CFP Board will also conduct a background check on you.

When to Work With a CFP® Professional

Working with a certified financial planner can be particularly helpful for individuals who want guidance across multiple areas of their financial lives. Because CFP® professionals are trained in comprehensive financial planning, they often assist clients who are managing several financial priorities at the same time.

Many people seek the help of a CFP® professional during major life events or financial transitions. These may include planning for retirement, purchasing a home, starting a family, receiving an inheritance or preparing for significant career changes. During these moments, financial decisions in one area can affect others, making coordinated planning especially important.

CFP® professionals may help clients create long-term financial plans that incorporate savings strategies, investment management, risk management and tax considerations. For example, an advisor might help a client determine how much to save for retirement while balancing other goals such as funding a child’s education or paying down debt. Because CFP® professionals are trained to evaluate the broader financial picture, they can help clients align these decisions with their long-term objectives.

In some situations, another type of financial professional may be more appropriate. For instance, investors seeking highly specialized portfolio management may work with an advisor who holds an investment-focused credential. However, individuals who want comprehensive planning across multiple financial topics may benefit from working with a CFP® professional who is trained to coordinate these elements into a unified financial strategy.

Bottom Line

Becoming a certified financial planner isn’t for everyone. For some, the requirements may be too rigorous or too costly in terms of both time and money. But obtaining CFP® certification is a mark of professional excellence that can make it easier to find clients. For consumers looking for financial advisors, CFP® certification is an indicator of quality and reliability. That means a lot to people seeking financial stability and reassurance.

Next Steps

Consider whether the CFP® certification is the right option for you. There are a number of financial advisor certifications to choose from. An alternative to the CFP® certification is the chartered financial consultant (ChFC) designation, a similarly prestigious designation that requires similar coursework, in addition to a few elective courses focused on particular areas of financial planning. The key difference between the two certifications is that ChFC candidates don’t have to pass a comprehensive board exam like CFP® candidates do.
If you’re on the flip side of the equation and you’re trying to find a CFP® to work with, finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.